Lilly is paying Boehringer Ingelheim (BI) €300 million (about $402 million) up front to seal an alliance covering the joint development and commercialization of a pipeline of each others’ late clinical-stage diabetes compounds. The deal is centered on BI’s oral diabetes candidates linagliptin and BI10773, and Lilly’s two basal insulin analogues LY2605541 and LY2963016. BI also has an option to co-develop and co-commercialize Lilly’s Phase II-stage anti-TGF-beta mAb.

The financial nuts and bolts of the deal could see BI earn an additional €625 million ($838 million) in success-based regulatory milestones relating to the development of linagliptin and BI10773, on top of its up-front fee. Lilly could receive up to $650 million in success-based regulatory milestones for its two basal insulin analogues. If BI decides to opt-in to the Phase III development and potential commercialization of the anti-TGF-beta mAb, Lilly could earn up to another $525 million through an opt-in fee and success-based regulatory milestones.

The firms will share ongoing development costs equally and also split down the middle the commercialization costs and gross margin of any product covered by their alliance that achieves regulatory approval.

“We are very excited about this new and extensive alliance with BI, with whom we have partnered successfully in the past,” comments John C. Lechleiter, Ph.D., Lilly chairman and CEO. “Working together, we will comprise one of the most robust diabetes pipelines in the pharmaceutical industry. For Lilly, this alliance expands our range of offerings for people with diabetes, strengthens our diabetes care capabilities, and offers the prospect of near-term revenue opportunities.”

BI’s linagliptin is a dipeptidyl peptidase-4 (DPP-4) inhibitor currently under regulatory review in the U.S., Europe, and Japan as a once-daily oral treatment for type 2 diabetes. BI10773 is a sodium-dependent glucose co-transporter-2 (SGLT-2) inhibitor that started in Phase III trials during 2010. BI points out there are currently no SGLT-2 inhibitors approved for diabetes therapy.

Lilly’s two basal insulin analogues are both projected to start in Phase III during 2011. The firm describes LY2605541 as a structurally novel basal insulin analogue, while LY2963016 is a new insulin glargine product. The anti-TGF-beta mAb to which BI also has an option is currently in Phase II development in patients with diabetes and chronic kidney disease.